EADS under fire over job cuts in defense shake-up

Tim Hepher, Gernot Heller

4 Min Read

PARIS/BERLIN (Reuters) - Airbus parent EADS EAD.PA came under fire on Tuesday from shareholders France and Germany over plans to cut 5,800 jobs, but its chief executive said that ignoring weak defense and space markets would have put even more jobs at risk.

The headquarter of EADS defence unit Cassidian is pictured in the German city of Unterschleissheim, north of Munich December 10, 2013. REUTERS/Michael Dalder

EADS said a three-year reorganization of its defense and space activities would affect 4,500 jobs on its main payroll, of which 1,500 would be redeployed to commercial planemaker Airbus and helicopter unit Eurocopter.

It issued figures showing that the largest burden of job reductions would fall in Germany, where 2,000 jobs would be cut compared with 1,260 in France, 557 in Spain and 450 in the UK.

The plan calls for between 1,000 and 1,450 forced layoffs and EADS will not renew 1,300 temporary employment contracts.

“We appeal to the aerospace company to be as careful and socially circumspect as possible in cutting these jobs and assume that the cuts will not be to the disproportionate disadvantage of German sites,” Berlin’s economy ministry said.

In France, the Socialist government said it would not accept forced redundancies.

“This company makes money ... and if it wants to restructure and adapt, fine. But it also has a duty ... to adopt measures to avoid any redundancies,” Labor Minister Michel Sapin said.

“For France, it will never be accepted, because it would not be acceptable, that a company like Airbus or EADS should cut overall employment while it still has the capacity to re-absorb anyone losing their job,” he told Europe 1 radio.

The job cuts are the first since EADS negotiated greater independence from governments that collectively control 28 percent of its capital earlier this year, giving them a veto over national security but no control over industrial issues.

Enders said EADS had acted to head off even worse job cuts in the face shrinking European defense budgets and rising competition and weak orders in the space market.

He said he had informed European governments about the proposals, which he compared to the “Power8” restructuring that was credited with bolstering Airbus in 2007.

“DOING THE RIGHT THING”

“We had the same criticisms then: ‘you are killing the company, you are greedy and just chasing profit’. This sounds very similar and hence doesn’t disturb us too much. We know we are doing the right thing,” Enders told reporters.

“Is it good management to wait until you drive into the wall? Or is it good management to be proactive and when you see the wall is coming, you hit the brakes and take measures?”

Shares in EADS fell 0.7 percent to 50.1 euros.

In a note, Societe Generale analyst Zafar Khan estimated the restructuring would cost EADS 250-300 million euros in one-off charges but would provide annual gross savings of 375 million euros ($515 million) once completed.

Compulsory redundancies are relatively rare in France and Germany, where EADS has its main operations, and so far the majority of its 140,000 workers have been shielded by the strength of its fast-growing Airbus commercial business.

Unions in France and Germany vowed to resist any sackings.

The cutbacks coincide with plans to merge the company’s defense and space divisions into one unit combining its share of Eurofighter combat jets and Ariane space rockets from January. EADS will also change its name to Airbus next year.

Bernhard Gerwert, head of EADS’s defense division and designated chief executive of the new Airbus Defense and Space unit, said more jobs could be cut if the Eurofighter combat jet consortium did not win more orders before 2018.

EADS is looking at ways of reorganizing the consortium, which also includes Britain’s BAE Systems (BAES.L) and Italy’s Finmeccanica SIFI.MI.